Insolvency & Bankruptcy Board of India Chairman M S Sahoo today said the new Insolvency and Bankruptcy Code provided the ultimate economic freedom, the freedom to exit, and described it as the "biggest" economic reform in recent years.
Insolvency & Bankruptcy Board of India (IBBI) Chairman M S Sahoo today said the new Insolvency and Bankruptcy Code provided the ultimate economic freedom, the freedom to exit, and described it as the “biggest” economic reform in recent years. The code seeks to consolidate and amend laws relating to reorganisation as well as insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner. The economy witnessed freedom of entry in 1990’s, freedom of competition in 2000’s and the code now provided the ultimate economic freedom- freedom to exit, and also a mechanism to address honest, relative failures, Sahoo said. He said it enables honest firms inundated by fear of failure to come in, get out including institutions and thereby realise full potential of every person.
“In the process, the code also improves ease of doing business, promotes entrepreneurship, develops corporate debt market, increases options for corporate debt financing and much more to improve growth, promote inclusive growth and addresses key legal economic problems,” he added. Sahoo was speaking at the National Conference on Insolvency and Bankruptcy Code organised by the Associated Chambers of Commerce and Industry of India (ASSOCHAM). Under the new law, employees, creditors and shareholders would have powers to initiate winding up process at the first sign of financial stress such as serious default in repayment of bank loan. Stating that “all of us seem to be in a great hurry” to implement this reform, Sahoo pointed out that this code came into force on May 28 last year and almost the entire ecosystem was in place.
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He said information utility was about to come and the entire regulatory framework about the corporate insolvency resolution was also in place. “We have about 200 transactions (corporate insolvency resolution processed transactions) on the way and matters are getting sorted out as we move on,” he said. Admitting that there were hiccups at the beginning, Sahoo said many things had already been sorted out. “200 transactions are on, including 12 big accounts of the RBI out of which 7 have already been admitted and many legal issues have already been sorted out by National Company Law Tribunal, even the Supreme Court sorted out one matter recently,” he added. He also said one information utility under the Insolvency & Bankruptcy Code has been approved and it was expected to be operational over the next few days.
“We have given in principle approval to one IU, it is a big IT project they have to have a threshold of information before really operating we would expect this to be operational over next few days,” he told reporters in response to a question on the sidelines of the event. The information utilities would perform the function of databases of financial information, duly authenticated by borrowers/creditors, which is accessible in a universal format. Information utilities will be regulated by the IBBI. Once operational, the IUs will expedite decision taking processes for IBC and assist the National Company Law Tribunal.